Monthly Archives: December 2014

Plans for a new year

I like January – it is the time of the year that I spend planning what I would like to accomplish with the year.  Even if I don’t accomplish what I planned, at least I will be trying!

I used to do the New Year Resolution thing, but that doesn’t work for me. I need more time to think about it.  A few years ago a good friend of mine suggested that I might want to use the month of January to identify my “intentions” for the year – it seemed to work for her so I borrowed the idea and now do it every year.

Planning for improvements in your wealth is usually a good place to start, whether you are making revenue plans, reduced spending plans or investment plans – think about what you want by using the month of January – it is cold anyway so you might just as well spend some time planning.

The upcoming 2015 year will be an interesting one with the price of oil being close to 50% of what it was to start 2014.  Does it make any sense – of course not , but that is the way it is – maybe there is a chance to make money there?

My personal feeling is that there is not a lot of downside risk on oil pricing.  I read lots of things about the possibility of $20 oil but it seems quite unlikely to me since the producers control the price and they have costs to cover – producing $20 oil for $45 doesn’t seem like good business and I don’t see it happening for long.

Looking the other way at oil though, in my opinion,  leaves quite a lot of room on the upside.

For example, as I write this, oil is trading (WTI) at about $56, so an increase to say $75 is not too outrageous and would be about a 33% increase.  If you combine that with an Exchange Traded Fund that multiplies the gain such as the Horizon HOU fund you could achieve 67% gain – certainly better than your guaranteed 1.25% at your bank when inflation is at 2%!

That is just an idea of planning – what do you want out of the new year – January is a great time to give it some thought!

Seriously $55 a barrel oil

I have been watching this oil price silliness for a while now and it is getting ridiculous now.  Basically, the commodity that the entire world runs on and of which there is at best a 50 year supply left – forever, and the Saudis want to sell as much as possible as cheaply as possible!

Have they thought about what is going to happen in Saudi Arabia when the oil is gone and the millions of young people there have no other resource and no food?

It is time to think ahead a little!

Wealth – what is your goal?

Wealth – what is your goal

Have you ever thought about what you would like to have for wealth and why you would want that?   I hear people say all the time “why are we not rich” or “if I was rich I would …” but what do we really mean when we say it. I honestly think that is a significant part of our problem with finding and keeping our wealth, that we really have not thought about it in detail and therefore cannot focus on what is it we want to achieve.

As a result of not having any real substance in our ideas, we only think about as a fleeting thought and never really have any impact in our lives as a result. I am not a true believer in the “create things by your thoughts” school of thought however if we have a clear idea of what we want and why we want it, we are very much more likely to achieve it because we are more likely to act.

So, let’s think about it for a few minutes – what do we really mean by wealth – why do we want it and what will it do for us?   I am a big fan of examples in life – examples are so easy to understand and therefore have an impact on people’s thoughts. I will use a couple of examples to make suggestions in this post – remember I am no expert however I have quite a number of years of experience in life and I always analyze my thoughts so hopefully I have learned a few things through that process.

What is wealth

This is a very individual thing. Wealth is used in our society to improve our lifestyle or someone else’s lifestyle – maybe for a little while or for the long term. We always struggle (or at least I do) with the internal debate about whether to enjoy the wealth now or save it for enjoying over the long term.

For me, the ultimate wealth would be to have control of my time thus using financial wealth to create free time. To make progress toward to this goal, I would need to create financial wealth that I could put away to generate enough of a return in the future to increase my free time (the amount of time I could stay away from work).

Some focus

As you can see, through this process, I have already identified what “wealth” means for me – a way to generate more free time so that I can choose what to do with my days. This kind of focus does not come from simply wishing for something – it comes from actually thinking about what you would really like to be doing (doing what I choose to do).

Once I know what I would want to have financial wealth for (free time) I can start to get a picture of what that means about how much wealth I would need to accumulate to generate the free time that I want. Of course we might think this process is simplistic but focusing human thought to the point that makes us take action to achieve a goal is no simple thing. Once we know where to go, we can start to go there – simple yes, but amazingly powerful.

Now that I know that using wealth over the longer term to increase my free time is what I want, I find it easier with my internal debate about whether to use wealth in the short term (buy something) or save it so that it will generate a return later to help me create free time.

How Can Wealth Create Free Time

I will do this quickly – if I can generate a 10% return on my invested wealth (and I believe that can be done) I can generate $100,000 annual income with a saved wealth of $1,000,000. This is a simple calculation but something to once again focus our thought process on what we would have to achieve helps so much with our motivation – once again, if you know where you are going it is so much easier to get there.

This is the general process that we have to go through to plan for retirement. If we want to retire, the money we need to live has to come from somewhere other than work (or it is not retirement). The source of this cash inflow can come from multiple sources and the sooner we have a plan about and start to act the easier it will be to achieve because “time” can be the most important factor in accumulation – we certainly should squander our time. Here is an example of the value of time in your investing (or creating and storing wealth). If you invest $30,000 at the rate of $1,000 per year at a 10% rate, you will have $180,000 which is mostly the result of time $150,000 is from interest and time and only $30,000 from saving. Another way of saying that is your investment of $1,000 per year is worth six times what you invested because of the time value of money!

Quick Summary

This post is about gaining some focus on what we want. The calculations are simple and don’t necessarily apply to anyone in particular but are meant to give you a sense that you can imagine plans for the future and set things in motion to achieve them. The amount of wealth we will need in the future is very individual depending on whether we are creating 100% of our future wealth or just supplementing a pension that is already in place.

 

Tagline topics – Find, keep and enjoy your wealth

In my “tagline” or the subtitle of my blog Find, keep and enjoy your wealth there are three areas of focus that will allow my readers to create a better life. Finding wealth is very satisfying – it helps us feel free and in our capitalist society actually does create freedom. Keeping our wealth is a critical skill that many “parasite” businesses hope most people will never learn. Financial businesses make a fortune from that few percentage points that we don’t think we can make. Keeping our wealth integrates well with finding wealth since we all know that “the rich get richer”.   Finally the third action in the tagline and the most important of the three            ” enjoy “!  I want to spend quite a bit of time on enjoying your wealth, whether it be travel, cars, bikes, boats or any other fun thing you can pursue with your wealth.

Investment Returns over 40 years!

I just did some quick calculations about investing for retirement because the idea was bouncing around in my head. Basically if you invest 5 percent of your income at a rate of return of about 6.3% over a 40 year period, you can create an investment income equal to your income. I will develop some tables to show this more clearly but I just wanted to let you know that.